Composite Risk Quantification

The next step is to quantify the likelihood of each risk's eventuating and its impact on the project and surrounding business. Each risk is prioritized according to the likelihood and impact rating and the low, medium and high priority risks are clearly marked for attention.

Likelihood

Describe the scoring system for measuring the ‘likelihood’ of the risk eventuating. Example:

Title	Score©	Description
Very Low	20	Highly unlikely to occur; however, still needs to be monitored as certain circumstances could result in this risk becoming more likely to occur during the project
Low	40	Unlikely to occur, based on current information, as the circumstances likely to trigger the risk are also unlikely to occur©
Medium	60	Likely to occur as it is clear that the risk will probably eventuate
High	80	Very likely to occur, based on the circumstances of the project
Very High	100	Highly likely to occur as the circumstances which will cause this risk to eventuate are also very likely to be created

Impact

Describe the scoring system for measuring the ‘impact’ of the risk. Example:

Title	Score	Description©
Very Low	20	Insignificant impact on the project. It is not possible to measure the impact on the project as it is minimal
Low	40	Minor impact on the project, e.g. < 5% deviation in scope, scheduled end-date or project budget
Medium	60	Measurable impact on the project, e.g. 5-10% deviation in scope, scheduled end-date or project budget
High	80	Significant impact on the project, e.g. 10-25% deviation in scope, scheduled end-date or project budget
Very High	100	Major impact on the project, e.g. >25%% deviation in scope, scheduled end-date or project budget

 

Priority

Establish the priority of each risk by identifying the likelihood of the risk's eventuating and its impact on the project. Once the likelihood and impact scores have been allocated, the priority score should be calculated as follows:

·         Priority equals the average Likelihood and Impact score

·         This is calculated as Priority = (Likelihood + Impact) / 2©

Complete the following table (includes examples):

ID	Likelihood	Impact©	Priority Score	Rating
1.1	20	80	50	Medium
1.2	80	60	70	High
1.3	100	40	70	High
2.1	40	20	30	Low
2.2	80	100	80	Very High
2.3	20	80	50	Medium

The Rating is based on the calculated Priority score. Use the following system to determine the Rating:

Priority Score              Priority Rating

0 – 20                          Very low

21 – 40                        Low

41 – 60                        Medium

61 – 80                        High

81 – 100                      Very High©

Finally, it is worth colour-coding the above final ratings to highlight the risks which require the most attention. The following system is used to colour-code the risks identified:

Priority Rating             Colour

Very low                      Blue

Low                             Green

Medium                       Yellow

High                             Orange

Very High                    Red